The Murdochs' Bid for Sky: It’s a Family Deal

It used to be that all the moves inside of Rupert Murdoch’s New Corp were about Rupert Murdoch. He supplied the motivation and was the beneficiary. In that sense, News Corp has been possibly the most uncomplicated major company on the planet. But it’s different now. Each member of the Murdoch family has his or her own corporate strategy—not least of all about how to keep the old man in check.

BSkyB, the British satellite television company, of which News Corp owns 39%, is the turf of James Murdoch, Rupert’s fourth child. James became the CEO of Sky in 2003 (this was after a bit of contretemps about the minority shareholder appointing his son CEO—but Rupert called in many chits to quell the tide of disapproval), and from that perch became his father’s heir apparent. In 2008, after Rupert bought the Wall Street Journal—which James viewed as his father’s first step away from leadership of the entire company—he moved Les Hinton, the longtime lieutenant who ran his papers in London, to New York. Rupert decided James should take Hinton’s job. This job, as it happened, had already been promised to the editor of the Sun, Rebekah Wade—close friend of James and his sister, Elisabeth (friends of the Murdoch children run a kind of shadow middle-management at News Corp). But Rupert—in a sudden burst of atavism brought on by his acquisition of the Journal—decided that if James was to succeed him, he needed some newspaper experience. (Also, Rupert was under pressure from his wife Wendi not to travel so much—he needed to pass the reins in London.) Even though his father added Asia to James' new portfolio (although not Australia, which would have involved stepping on his brother Lachlan’s toes), James viewed his new job as a downgrade from Sky. For one thing, even a minority-owned Sky contributed much more to News Corp’s profits than the shrinking British newspaper business. (James remained as non-executive chairman of Sky—a figurehead position.) For another, James was a television guy, not, he would remind anyone who tried to characterize his career, a newspaper man.

So father and son struck a deal. James would take the newspaper job, but as soon as News Corp could buy the rest of Sky, it would—which would give James one of the most significant profit centers in the company (in a sense, his portfolio would rival his father’s). The complication was a Labour government with its historic resistance to the Murdochs. So, as part of the deal between father and son, Murdoch agreed to consider relinquishing his longtime support for Labour Prime Minister Gordon Brown in favor of Rebekah Wade’s candidate, David Cameron. Wade, who will, with the acquisition of Sky and James’ vastly elevated role, also receive an enhanced portfolio, lead the campaign to sell Cameron to Murdoch and, ultimately, to shepherd the support of the Murdoch papers for Cameron. (This caused other problems in the Murdoch household because Wendi is a great chum of Brown’s wife, Sarah.)

The acquisition of Sky took on an added urgency with the strong results in the US of Fox News, run by Roger Ailes, the troglodyte conservative and historic nemesis of the Murdoch children. (Ailes had been instrumental in the ouster of Lachlan Murdoch from a leadership role in the company.)

Still, Murdoch himself is ambivalent. He knows he is handing James something of a gun—the more important his children become, inevitably the less important he becomes. What’s more, if he could, however quixotically, he’d concentrate his firepower on newspapers. Also, he still feels guilty about abandoning Gordon Brown.

For James, Sky is an important part of the dream that all the Murdoch children have, to somehow meet their father on equal ground—and to finally push him out of the door.

More of Newser founder Michael Wolff's articles and commentary can be found at VanityFair.com, where he writes a regular column. He can be emailed at michael@newser.com. You can also follow him on Twitter: @MichaelWolffNYC.

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